CSRC head vows stronger effort on enforcement
Following up on strong words about enforcement, the head of the China Securities Regulatory Commission, Xiao Gang, said his agency would double its investigative team with 600 new staff.
The plan, disclosed by Xiao on the agency’s website on Tuesday, is widely seen as a signal that the CSRC is taking serious steps to address deficiencies in the capital markets.
Earlier at an internal work conference, Xiao urged his staff to step up their efforts in investigation and enforcement.
His call came amid the fallout of the Everbright Securities Co Ltd trading error last week, which exposed irregularities and structural flaws in the industry.
Xiao told the work conference that CSRC investigators should “sufficiently use power both in and out of the system, especially public security organs in all levels, to ensure the safety of investigators”. The conference discussed new guidelines on investigations and law enforcement involving the stock and futures markets.
Xiao said the 600 new investigators will be sent to six equity and futures exchanges.
“Investigation and hearing of a case should be finished within one year. Exceeding the time limit requires clear explanation,” he said.
Analysts said Xiao may have received higher- level support to get around bureaucratic and budget constraints The CSRC reports directly to the State Council, China’s cabinet.
Investors want the CSRC to release the results of the probe into last Friday’s “fat finger” incident involving Everbright as soon as possible.
“I don’t understand what takes so long for the CSRC to decide whether Everbright manipulated the market. In my opinion, the answer is crystal clear,” said Gen Shuang, senior partner of the Guangzhou-based Bestfound Law Firm.
She said Everbright had amassed capital to buy certain shares, which matches the definition for market manipulation under China’s Securities Law, no matter it was intentional or not.
Gen noted that in China, courts can’t accept lawsuits from those claiming to be harmed by the incident, unless the CSRC characterizes what Everbright did as “market manipulation”.
She said the CSRC “should disclose its progress during the process. At least they should tell people the direction of their investigation,” she added.
The unintended purchases using 7.2 billion yuan ($1.17 billion) from Everbright drove the benchmark Shanghai Composite Index up 5 percent in two minutes.
The move attracted many small investors, who didn’t know the index had surged on a system error. Short sellers also experienced large losses.
The CSRC on Sunday said it had started an investigation. It didn’t say exactly when the results would be released.
“I am a little concerned what will happen if the investigation reaches somewhere that requires power beyond the CSRC. I do not see many successful cases based on cooperation between the securities watchdog and criminal investigation authorities in China,” said Xu Zhong, a general partner of a private equity fund in Chengdu, Sichuan.
Xiao recently published an article in Qiushi Journal, a political periodical run by the Central Party School, saying that his agency’s investigators face problems ranging from detection to evidence gathering to conviction — and even “violent resistance”.
The Shanghai Composite fell 0.62 percent to 2,072.60 on Tuesday. Brokerages fell for a second day on concerns about weaker profits and stricter supervision after the Everbright incident.
Everbright itself closed limit- down after resuming trade on Tuesday.